Bank of Nova Scotia v Sellars Financial Inc., 2011 ABQB 561

Court of Queen ’ s Bench of Alberta Citation: Bank of Nova Scotia v Sellars Financial Inc., 2011 ABQB 561 Date: 20110914 Docket: 0903 20455 Registry: Edmonton Between: The Bank of Nova Scotia and Scotia Mortgage Corporation Plaintiffs - and - Sellars Financial Inc. and Robert J. Sellars Defendants _______________________________________________________ Memorandum of Decision of W. Breitkreuz, Master in Chambers _______________________________________________________ [ 1 ] This is a very tragic situation.

There are a number of claimants who were victimized by the Defendants in a ponzi scheme but only two of the claimants made appearances and presented short written submissions, and filed affidavits. One other claimant only filed an affidavit. [ 2 ] The Plaintiff, the Bank of Nova Scotia, gave a loan to the Defendants in 2002 and obtained as security for that loan the assignment of three life insurance policies issued by Empire Financial Group. The other Plaintiff ’ s status in the matter is not clear to me except the file shows that both Plaintiffs have obtained

summary judgment against the Defendants in the sum of $231,622.48 plus interest, plus solicitor-client costs on April 23, 2010. [ 3 ] Empire Financial Group ’ s solicitors paid $212,000 more or less into Court when the Plaintiffs claimed on the assignments.

[ 4 ] The evidence is undisputed that on October 18, 2002 the policy owners assigned the three life insurance policies to the Bank of Nova Scotia, and that on October 28, 2002 Empire Financial Group acknowledged notice of the assignments, and that the assignments have been recorded in their files, and that on the same date they forwarded a copy of the assignments to Mr. Sellars, showing an acknowledgement of their receipt of the assignments on them. [ 5 ] On April 23, 2010 the Plaintiff obtained

Summary Judgment against the Defendants in the sum of $231,622.48 plus interest, plus solicitor-client costs. The costs are in the sum of $4,114.86. [ 6 ] As stated earlier, three claimants filed Affidavits but only two filed briefs and attended at the application. They were Maryann Fyhn, and Roy Tarnasky. [ 7 ] Ms. Fyhn ’ s claim is in the amount of $120,000, and Mr. Tarnasky ’ s claim is in the amount of $550,000. The claimant who filed an Affidavit but did not attend the application is John Kong whose claim is $60,000.

The evidence is that the two claimants who filed submissions and attended at the application, both invested their entire life savings in this scheme. [ 8 ] The Fyhn and Tarnasky Affidavits attach Restitution Orders dated October 18, 2010. [ 9 ] Their claim is undisputed but their right to any of the proceeds of the life insurance policy is disputed.

I think it is fair to say that their argument is based almost entirely on compassionate grounds and I am suggesting that it is fair to infer from their submissions that they acknowledge very little hope of succeeding in this priority application. [ 10 ] I raised the question of whether this type of security needs to be registered under the Personal Property Security Act , R.S.A. 2000, c.P-7 to perfect the Plaintiffs ’ security, and Mr. Livingstone has satisfied me that it is not necessary in these circumstances. [ 11 ]

Section 4 of the Act provides as follows: Non-application of Act 4 Except as otherwise provided under this Act, this Act does not apply to the following: . . . (

c) the creation or transfer of an interest or claim in or under any policy of insurance, except the transfer of a right to money or other value payable under a policy of insurance as indemnity or compensation for loss of or damage to collateral; (c.1) a transfer of an interest in or claim in or under a contract of annuity, other than a contract of annuity held by a securities intermediary for another person in a securities account; [ 12 ] It will be seen from this that the Act does apply where the scheme or object of the transfer of the interest in the policy is to indemnify or compensate for the loss of damage to collateral.

The exception appears to be restricted to the assignment of an interest in the benefits of an insurance policy that insures goods purchased where the purchaser has provided an insurance policy with loss payable to either the unpaid vendor or the bank or finance company. That is clearly not the case here.

[ 13 ] Accordingly the direction will be that the proceeds paid into Court will be released to the Plaintiffs. [ 14 ] The Plaintiffs have not asked for costs against the claimants who opposed the application, and accordingly there will be no costs granted. Heard on the 7 th day of July, 2011. Dated at the City of Edmonton, Alberta this 13 th day of September, 2011. W. Breitkreuz M.C.C.Q.B.A. Appearances: Stephen J. Livingstone McLennan Ross LLP for the Plaintiffs Maryann Fyhn - Claimant Appeared on Her Own Behalf Roy Tarnasky - Claimant Appeared on His Own Behalf